Harnessing Canada's Digital Potential

Summary

1. A strong, competitive digital economy is key to Canadian prosperity in the 21^st Century. Technology, particularly a leading–edge communications infrastructure, is an enabler of ideas, opportunities and knowledge: it creates a platform for innovation on the part of Canadian companies of all sizes and across all industries, which in turn creates yet better technology. Better technology drives productivity, and productivity creates jobs and raises living standards. While the consumer market and consumer broadband adoption are important factors for building digital skills and the information and communications technology (ICT) industry, consumer adoption alone and the rollout of broadband infrastructure to rural and remote communities will not drive economic growth and prosperity for Canada. The key to unlocking Canada's digital leadership potential lies within small to medium Canadian enterprises. While small and medium enterprises (SMEs) have long been recognized as Canada's economic engine, this segment of the economy does not benefit from vibrant telecommunications competition.
2. Time is of the essence. Telecommunications infrastructure worldwide is rapidly evolving to digital broadband and in order for Canada to leverage the creative potential of the SME segment the Government of Canada must have a policy framework that embraces competition and recognizes the inherent challenges of bringing full telecommunications competition to Canadian businesses. One clear advantage that the large incumbent telecommunications companies have is their stranglehold over the business market, arising from the fact that they are the sole ubiquitous network providers in this crucial market segment. Not surprisingly this has led incumbent providers to take a complacent approach to deployment of innovative broadband telecommunications infrastructure and solutions within the SME market segment. As a result, Canadian businesses, especially SMEs, are less able than their international counterparts to invest in and deliver the innovation necessary to close either the digital or the productivity gap with other leading economies. Foreign investment rules shield larger Canadian incumbent telecommunications companies from competitive pressure to innovate, and limit access to capital. Because of this, Canadian telecom carriers are slower to invest in and deploy leading–edge technologies, and new entrant carriers, with an inherent need to innovate, are restrained by foreign investment rules which limit the scale and scope of necessary capital investment. The lack of competition, investment and innovation in the SME market has an impact on larger businesses and, to a certain extent, the public sector because it shields them from the pressure to adopt innovative, and often ultimately cost–saving services and solutions.
3. In initiating this Consultation it is clear that the Government recognizes that status quo is unacceptable. Having innovated many "firsts" in the digital field, MTS Allstream believes that with the right approach, Canada can close the gap with other digital leaders. To do so, the policy, regulatory and legislative framework behind the Digital Economy Strategy must fundamentally recognize that competition drives investment, innovation, and consumer choice.
4. That said, competition has not been, nor will it be, in and of itself, the solution to bridging the urban–rural divide. Nor will competition in the SME market develop automatically. These are areas where regulation must be employed to allow competitive forces to act.
5. In our view the best way for Canada to surge forward is to unleash the innovation of our SMEs to allow them to compete with the very best in the world. Achieving this involves a Digital Economy Strategy with a very direct focus on addressing the remaining impediments to full competition in the Canadian telecommunications sector. Competition is necessary to, and inextricably linked with, greater investment and innovation. But given the capital–intensity of investments in broadband network infrastructure, competition will not occur without recognition that the access portion of the network (i.e., the "last mile") remains an enduring bottleneck. A policy and regulatory framework that provides competitor telecommunications service providers with equitable access to essential infrastructure through a robust wholesale framework, and that increases the capital available to these competitors by bringing Canada's foreign direct investment rules in line with other developed and developing countries, would provide the necessary impetus for dynamic change to Canada's digital landscape.
   
   About MTS Allstream.
6. MTS Allstream, as one of Canada's leading national communication solutions companies, sees the challenge from a multifaceted perspective.
7. As the incumbent communications service provider in the province of Manitoba, representative as it is of the geographic, demographic and economic diversity found across Canada, MTS Allstream sees how communications technology affects Canadian consumers, be they rural or urban, and Canadian businesses, ranging from small family businesses to large, multinational enterprises.
8. As Canada's All–Business Communications Provider, with 85,000 small business customers and 20,000 mid–market and large enterprise customers, MTS Allstream sees also how Canadian businesses, and particularly small and medium businesses, have the potential and are poised to accelerate Canada's digital economy when full competition, and with it, investment and innovation, come to this market segment. MTS Allstream has made the investments to roll out the first IP–enabled national network backbone to serve the needs of Canadian businesses nationally. It serves these customers using a combination of its own facilities and those it must lease from incumbent providers in their serving territories.
9. Finally as the incumbent communications service provider in Manitoba, and a competitor across the rest of Canada, MTS Allstream understands how opening the marketplace to new competition inspires incumbents and competitors alike to innovate to serve customers with higher quality, lower cost, cutting–edge technology solutions.

Submission

Introduction

1. MTS Allstream applauds the commitment made by the Government of Canada in the 2010 Speech from the Throne "to launch a digital economy strategy to drive the adoption of new technology across the country." MTS Allstream appreciates the opportunity to submit comments in the "Digital Economy Strategy" consultation launched by Industry Canada, Human Resources and Skills Development Canada, and Canadian Heritage in furtherance of that goal and to assist in developing Canada's digital plan. The Consultation Paper, entitled "Improving Canada's Digital Advantage — Strategies for Sustainable Prosperity" speaks to our international competitiveness and our place within the global digital economy and seeks input on various questions within five discussion themes:
   1. Innovation using digital technologies;
   2. Digital infrastructure;
   3. Growing the ICT industry;
   4. Canada's digital content; and,
   5. Building digital skills.
2. In MTS Allstream's view the underpinnings of any successful strategy is the infrastructure. If Canada is to emerge as a leader in the digital economy it must have a state of the art digital network infrastructure. Indeed such infrastructure is fundamental to ICT industry development, the deployment of innovative digital technologies, the adoption thereof by Canadian businesses, and the development of digital media and digital skills more broadly. For this reason our comments are focused on the questions raised in the context of the second issue in the Consultation Paper — building a world class digital infrastructure.
   
   Fuelling Canada's Economic Growth through Investment and Innovation
3. As recognized by the Government, a strong, competitive digital economy is key to Canadian prosperity in the 21^st Century. Technology, particularly a leading–edge communications infrastructure, is an enabler of ideas, opportunities and knowledge: it creates a platform for innovation on the part of Canadian companies of all sizes and across all industries, which creates yet better technology. Better technology, in turn, drives productivity, and productivity creates jobs and raises living standards.
4. Canadian residential customers are beginning to experience the benefits of telecommunications competition. These benefits are derived from the dynamic that has emerged through two sources: (i) the convergence of the telephone and cable company networks, and (ii) additional competition to the Big 3 national wireless service providers — Bell, TELUS and Rogers — facilitated by the Advanced Wireless Spectrum (AWS) auction new entrant set–aside and the post–auction market license conditions mandating roaming and tower and site sharing.
5. While the consumer market and consumer broadband adoption is an important factor for building digital skills and the ICT industry, consumer adoption alone and the rollout of broadband infrastructure to rural and remote communities will not drive economic growth and prosperity for Canada. The key to harnessing Canada's digital leadership potential lies with SMEs. While SMEs have long been recognized as Canada's economic engine, this segment of the economy is bereft of vibrant telecommunications competition, with regional markets across Canada characteristically dominated by large incumbent service providers originating from a former state–granted monopoly. To a large extent the regulatory framework has shielded these incumbents from domestic and foreign competition. Unlike the residential market which often involves two competing wireline networks, within the business market there is no potential for end–to–end competition. This means that in order for competition to occur, other service providers like MTS Allstream require wholesale access to the incumbents' network elements. The framework for wholesale access by smaller, innovating and potentially strong competitive communications providers to incumbent's monopoly–funded digital infrastructure is a major obstacle to competition. Having no mandated economic wholesale access to the incumbents' underlying broadband facilities and services (especially high–capacity technologies like Ethernet) needed to serve business customers prevents sustained entry and growth of competitors.
6. The current restrictions on foreign direct investment also serve to limit the ability of competitors to raise the risk capital needed to augment existing investments and to further invest in network expansion. Thus, the regulatory framework cripples competition and stifles investment by both competitors and the incumbent service providers. Without sufficient competition the pressure for the incumbents to make the investment necessary to deliver economically efficient and innovative telecommunications solutions to the SME sector, in particular, is lacking.
7. This is at a significant cost to Canadians, Canadian business and Canada's international standing in the global digital market.
8. The opportunity today is to overcome the sluggishness and underinvestment in telecommunications infrastructure and corresponding development of ICT applications. Doing so will significantly benefit Canadian businesses — the key contributors to Canada's international competitiveness — and help Canadian businesses and consumers fully realize technology's social and economic promises.
9. The Government of Canada's Consultation Paper identifies the scale, scope and consequences of Canada's digital delay, and the opportunities to be realized in getting up to speed with other leading countries. In MTS Allstream's view, there are two major, but moveable, obstacles restraining Canada's digital progress:
   
   
   The regulatory framework needs to take into account the importance of telecommunications competition in the business market. Although competition for consumer markets continues to grow due to intermodal competition between the telephone companies and cable companies, the lack of equitable wholesale access to essential network infrastructure acts as a drag on competition, investment and innovation in the SME market. As a result, Canadian businesses are less able to deliver world class digital solutions to Canadians than their international counterparts.
   
   Foreign investment rules shield Canadian companies from competitive pressure to innovate, and limit access to capital. As a result, Canadian telecommunications companies are slower to invest in and deploy leading–edge technologies, and competitors or new entrants which are poised to deliver such innovative technologies are restrained by foreign investment rules which limit the scale and scope of necessary capital investment.
10. To put Canada back on the path to digital leadership the Digital Economy Strategy must catalyze innovation, investment, infrastructure and growth, and it can only do so by fuelling the economic engine that drives Canada.
    
    Small–to–medium enterprises drive prosperity in Canada.
11. There is no debate: SMEs are the main driver of economic growth in Canada. The Government of Canada has explicitly recognized this:
    
    
    SMEs are critical to the Canadian economy: The success of SMEs affects the well–being of the Canadian economy and society as engines of job creation, economic growth and innovation. SMEs account for It 45% of GDP, much of the economy's growth, 60% of all jobs in the economy, and 75% of net employment growth. SMEs are an integral part of our country's economic fabric […]¹
12. Accordingly, a successful digital strategy must reflect the needs of SMEs as users of digital technology, and unleash SMEs' unique incentives to innovate. The challenge, however, is that SMEs are falling behind in terms of ICT adoption and innovation. Our analysis indicates that Canadian businesses lag in email use, website use and e–commerce, and are about four years behind the United States in selling on–line. The digital delay costs more than money, however: for example, Canada occupies last place in adoption of ICT in health care among the major industrialized countries. Why are Canadian SMEs falling behind? Because the telecommunications sector does not provide them with the cutting–edge solutions international competitiveness demands.
13. There is no question that Canada must do better, and can do better.
14. In the absence of meaningful competition, SMEs are often largely forgotten by incumbents, who focus on consumer markets and large enterprise customers. By contrast, entrants, who must differentiate their products to gain even a foothold, listen to SMEs' needs and cater to them in a more flexible manner. This is why competition is so critical to enabling the productivity of SMEs in particular.
    
    Driving domestic investment, innovation, and consumer choice through competition
15. The Consultation Paper appropriately flags Canada's waning international competitiveness. Being competitive abroad, however, first means being competitive at home. Simply put: to be competitive, Canadian businesses must be exposed to competition. The Consultation Paper recognizes this, quoting the Competition Policy Review Panel: "Being open to competition serves Canada's national interest."²
16. The Consultation Paper identifies "Promoting Competition and Investment" as a challenge within the discussion theme of Building a World–Class Digital Infrastructure, and raises the "key question" of "whether the right frameworks are in place to encourage competition and the right pace of progress".³ The Consultation Paper further states that Government can support a competitive ICT sector "by developing sound economic framework policies, ensuring competitive corporate tax rates and creating a positive foreign investment and research and development (R&D) environment."⁴
17. MTS Allstream agrees that the Government can and should promote the digital economy and prepare Canadian businesses for increasing international competition, and further agrees with the approaches identified. We advocate for greater emphasis in the policy mix on telecommunications competition — competition in both the consumer market and business market, and competition from abroad. Promoting competition will in turn accelerate investment and innovation. These forces are inseparable. Canada's telecommunications industry, with more competition, will deliver the maximum innovation possible to the market, as was the case in retail broadband. While it may be appropriate to articulate certain technical specifications at a later stage, forecasting and mandating speed is an often counterproductive, and unnecessary process, as the rapid increase in consumer broadband speeds continues to show.
18. Competition clearly drives investment and innovation. The United States' Federal Communications Commission recently highlighted the far reaching effects of competition, stating that competitive markets "create jobs, fuel economic growth, and offer innovative services for consumers".⁵ Not only is competition good for consumers and consumer choice — competition is also good for business, as MTS Allstream has experienced and witnessed firsthand. Competition, investment and innovation have a symbiotic relationship. MTS Allstream has, with its perspective as both an incumbent service provider in Manitoba and a competitor in the other provinces, witnessed and experienced the benefits of that symbiosis.
19. One example is the recent convergence of telecommunications and cable network technology and how that led to direct competition between incumbent telephone service providers and incumbent cable companies, and spurred rapid new investment. MTS Allstream prepared for the entry of a cable carrier into the residential voice service market in Manitoba by investing in its network infrastructure. As a result, MTS Allstream's MTS TV is one of North America's most successful distributors of television channels over telephone lines, using IP technology to deliver these services over a network that also carries data, Internet traffic and telephone service. MTS Allstream competes vigorously with Shaw Cable systems, which offers the same range of services over its two–way digital cable network.
20. Another compelling example of this phenomenon is the AWS auction the Government designed with the explicit goal of increasing competition. There, the Government took the steps necessary to ensure that there would be an opportunity for new entrants in the wireless market by establishing auction and licence rules that could facilitate the entry of several new wireless service providers in the Canadian market. Notwithstanding a later delay in the ability of one new entrant's ability to use its licensed spectrum due to foreign investment restrictions, the benefits of competition were apparent even prior to an offer of service. Immediately after the auction, and in anticipation of new entry, the incumbent wireless providers Rogers, Bell and TELUS began offering better pricing, terms and handsets to consumers. The prospect of increased competition also sparked significant investment through partnerships between Bell and TELUS — partnering to invest in and build an advanced HSPA (High–Speed Downlink Packet Access) network throughout Canada, and Rogers and MTS Allstream partnering to deploy an HSPA network throughout Manitoba and entering into an MVNO (Mobile Virtual Network) arrangement to enable MTS Allstream to offer wireless services to business customers throughout Canada. There is no question that this innovation and investment by incumbent companies would not have occurred at the pace and intensity that it did if the Government had not set the stage through the policy and rules it adopted for the AWS auction. Moreover, the AWS spectrum acquired through the dedicated set–aside of spectrum to be licensed only to new providers, in addition to generating $4B in auction revenues, has resulted in the potential entry of two major cable companies and the entry of three unaffiliated new wireless entrants.
21. The current regulatory framework, however, acts as a drag on competition, and therefore investment and innovation. As a result, Canadian businesses are less able to deliver world class digital solutions to Canadians than their international counterparts. The first obstacle to remove from Canada's path to digital leadership, therefore, are any aspects of the policy, regulatory and legislative framework that restrain competition.
22. The positive effects of competition for all stakeholders, and the absence of any compelling, legitimate reasons to restrain it, leads MTS Allstream to submit that Canada's Digital Economy Strategy should have competition as its key regulatory priority. Specifically this means promoting more competition within the crucial SME sector by (i) establishing a regulatory framework that provides wholesale access to incumbents' essential network infrastructure, and (ii) allowing more investment from abroad to allow smaller innovators to finance their innovations and inspire incumbents to do the same.
    
    Promoting More Competition in the Key SME market
23. Policy discussions about the digital economy have, importantly, tended to focus on increasing consumer access to broadband, bridging the urban–rural digital divide, and increasing competition in consumer markets. Competition has, with only one exception, continued to increasingly serve the consumer market.
24. Due to prohibitive costs, competition alone has not yet, and will not likely in the future bridge the urban–rural digital divide. Therefore, in the ongoing CRTC Proceeding to review access to basic telecommunications services and other matters⁶, MTS Allstream recognizes the goal of including broadband access expansion to rural communities in the CRTC's universal service objective. To be successful, however, this must include a balanced funding mechanism to offset the uneconomic costs of deploying the necessary infrastructure to remote areas.
25. Unlike consumers generally, but like remote consumers, businesses have not benefited from the same level of competition, and Canada urgently needs a policy that encourages competition and innovation in the SME and the business telecommunications market. This is because there is little competition by incumbents for SMEs' business, and SMEs have virtually no choice in terms of telecommunications services. This lack of choice means less incentive for the existing service providers, and less incentive means less innovation.
26. At one point, due to the opening of telecommunications markets to competition in the late 1990s, Canada had fourteen competitors to the incumbent (former monopoly–holding) telecommunications service providers. While the initial entry of those competitors, who were better–positioned to serve the SME market, looked promising, the regulatory framework and investment market dynamics eliminated all but MTS Allstream.
27. Canada again faces a market poised to innovate — the key will be enabling competition to take hold. For digital competition to take hold and the resulting benefits to the Canadian economy to follow, incumbent service providers must be given the incentive to compete not just for consumers' business, but for SMEs' business. Two ways to provide that incentive, as discussed below, are to promote more competition for SMEs by giving competitive communications service providers equitable access to the network infrastructure of incumbent telecommunications providers, and to allow foreign more foreign investment in telecommunications companies.
    
    (i) Promoting more competition through access to essential incumbent network infrastructure
28. The competitive environment in the business telecommunications market is dominated by two or three large players who will continue, in the absence of competition, to dominate.⁷ To compete with entrenched industry players, new entrant or competitor telecommunications service providers must use a combination of their own facilities and incumbent infrastructure (generally in the access portion of the network) that is uneconomic and inefficient to duplicate. The Consultation Paper also recognizes this:
    
    
    Telecommunications service provision is still subject to strong economies of scope and scale and the large up–front sunk costs can act as barriers to entry. The costs of upgrading equipment, digging trenches, and erecting poles can be immense, especially in a country as geographically challenging as Canada. As a result, the industry is often characterized by competition between a relatively small number of large firms that are capable of absorbing these significant fixed costs.⁸
29. It is noteworthy here that nowhere in the world has any incumbent network been replicated or duplicated because do so would be too costly and an inefficient use of resource.
30. The result of this is that smaller service providers (who, as explained below have more limited access to capital) struggle to bring their innovations to market, and incumbents therefore face little pressure to better serve the market. While the status quo benefits larger industry players, it frustrates a much larger segment of the economy.
31. At the CRTC Proceeding to consider the appropriateness of mandating certain wholesale high–speed access services⁹, there was widespread agreement that there is only one ubiquitous network — the incumbent telephone company network — capable of serving the whole business market. Unlike the residential market, where intermodal competition between the cable and telephone companies is taking hold, the business market continues to be dominated by incumbents whose de facto stranglehold of the networks impairs competitive access, and ultimately competitive choice. The limited ability of cable incumbents' networks to actually serve business premises means that incumbent telephone companies control access to those premises. Because it is not in the incumbents' perceived business interests to share their infrastructure and expose themselves to the pressures to innovate, MTS Allstream, and others, have urged the CRTC to mandate equitable wholesale access, and to reject any attempts to carve out so–called "next generation" incumbent network infrastructure from such mandated access.
32. The CRTC's decision with respect to wholesale access for underlying broadband services — particularly those inputs necessary to drive greater choice and innovation in the business market — will either accelerate Canada on its path to global leadership and growth or stall the vigorous competition necessary to stimulate investment, innovation and ICT adoption by Canadian businesses. A properly configured broadband access service — one that gives competitors affordable access to state–of–the art technology — is what's needed to unleash Canada's dormant digital potential.
    
    (ii) Driving domestic competition through foreign investment
33. The technology industry, and particularly telecommunications, is capital intensive. In order to move at the pace necessary to catch up to the world's digital leaders, Canadian companies need access to equity capital from beyond our borders.
34. The benefits of foreign direct investment (FDI) are widely recognised and undisputed, and allowing foreign ownership in smaller players in the telecommunications industry will create the competition that, as noted above, is required to spur further investment and innovation. FDI encourages the growth of efficient Canadian companies who can better compete at home and abroad. It increases productivity, attracts knowledge and best practices from outside our borders, and helps create a culture of innovation. Canada has experienced this firsthand — the biggest telecommunications companies were built in large part with foreign investment before current restrictions, and foreign investment in the oil and gas industry enhanced Canadian competitiveness.¹⁰
35. Canada, however, is an international outlier when it comes to FDI, sitting near the bottom of the OECD with respect to its foreign investment rules.¹¹ The principal impediment to attracting more FDI in the telecommunications sector is the requirement that Canadians have both legal control and effective control ("control in fact") of Canadian telecommunications companies. The restrictions force Canadian companies to rely more heavily on foreign debt, which often is unattractive to both issuers and investors.
36. Debt is often unattractive to Canadian companies because of onerous annual interest charges. This was the experience of Allstream, which, in 2000, operating as AT&T Canada, had to resort to debt financing to fund an innovative (but costly) rollout of a national IP network, leading later to a historically large restructuring in the face of onerous interest charges. Furthermore, debt is often unattractive to foreign investors who prefer to control their investments. Simply put, it is unreasonable to expect a non–Canadian investor to commit significant risk capital if they have to hand control of their investment over to a third party, or cannot consolidate their investment on their books.
37. Our analysis clearly shows that Canadians want the Government to encourage foreign investment, especially in the case of telecommunications, because Canadians recognize that allowing foreign investors more opportunity to invest in, build, and own telecommunications companies that operate in Canada, will result in more jobs, more consumer choice, and new ways to promote Canadian culture. The strong public opinion about Globalive's challenging path to market is a recent, obvious example. Although the auction process itself, as described above, resulted in near immediate investment and innovation by incumbent wireless providers, foreign ownership restrictions nearly frustrated Globalive's ability to launch WIND Mobile and yet further spur incumbents to innovate to retain customers.
38. As a result of the current FDI restrictions, not only are there fewer competitors in the telecommunications market in Canada, but this lack of competitive choice directly and adversely impacts SMEs, which, as discussed, are demonstrably slower in innovation and the adoption of ICTs than their international counterparts. The current regime not only prevents Canada from reaching its larger goals, but unevenly impacts new entrants and other competitors relative to the largest incumbent telephone and cable companies. These large incumbents — whose networks were funded in large part by foreign capital prior to the imposition of the FDI restrictions — can leverage their economies of scale and their free cash flow to significantly invest in their existing networks.
39. Conversely, competitor investment — which is crucial to greater competition, lower prices, and greater choice, particularly in the business market — is entirely risk–based. The stakes are higher, the risks are greater, and capital far less available from Canadian sources.
40. It is time for Canada to align with the rest of the world and open its doors to foreign investment.
41. In MTS Allstream's submission to the Standing Committee on Industry, Science and Technology¹², we noted that over the last decade, removing restrictions on foreign investment in the telecommunications sector has been repeatedly recommended in order to increase Canadian productivity, innovation and prosperity. Moreover, four separate reports¹³ commissioned by Canadian federal governments in the last decade have recommended reviewing and/or removing the restrictions. Each of these reports reached the same conclusion: FDI is crucial to Canada's economic success. As the Telecommunications Policy Review Panel wrote in its final report, "the economic case for liberalization of FDI is so well established in Canada and other OECD countries that the main area of economic debate is not whether it boosts domestic competitiveness and productivity but by how much."¹⁴
42. The Government has put forward three options which must be evaluated in terms of their respective ability to stimulate competition sufficient to change the competitive market paradigm for Canadian businesses and consumers.
43. The Digital Economy Strategy must change the competitive dynamic and promote additional competition. Without increased competition there will be no additional incentives to innovate, invest in infrastructure or to adjust pricing in order to compete.
44. To maximize the potential benefits of reform for consumers, the Government needs to address the capital needs of smaller players given Canada's relatively small investment market. MTS Allstream therefore supports the recommendation made in Compete to Win¹⁵ to allow investments by foreign entities in start–up telecommunications companies as well as in existing small¹⁶ industry players. Incremental proposals such as the proposal to raise FDI limits to 49% will not markedly change the status quo.
45. The changes to the FDI rules should provide the same impetus for the competition and investment within the telecommunications sector that the AWS rules described above created. A key factor in affecting this change will be the framework and pace of implementation the Government puts in place for FDI within the sector. MTS Allstream has provided the suggested amendments to the legislation and regulations in other submissions.¹⁷
    
    Conclusion
46. The key to productivity and prosperity is Canada's SME segment, which urgently needs access to innovative telecommunications tools, tools which can only be realized by a competitive telecommunications industry. As proposed, Canada's Digital Economy Strategy can enable such a competitive industry by (i) mandating equitable wholesale access to incumbents' digital facilities, and (ii) by allowing FDI in the telecommunications industry.
47. The Government has emphasized the fundamental role that broadband infrastructure and digital technology play in accelerating Canada's lagging productivity growth and ensuring Canada is poised to be a leader in the 21^st century global economy.
48. MTS Allstream, having seen the benefits of competition from its multi–faceted perspective as incumbent and competitor, and consumer and business service provider, has here emphasized the need for a policy framework founded on competition. Competition will not yet solve the important issues relating to rural and remote access given the cost scale. In that case, MTS Allstream is supportive of regulatory funding options to support building out the necessary infrastructure.
49. For the purpose of starting Canada's SME engine and putting Canada on pace internationally, however, competition, via equitable wholesale access to digital infrastructure and via increased foreign investment, is the key.

¹ Public Works and Government Services Canada, "Importance of SMEs", online

² Consultation Paper at page 9.

³ Consultation Paper at page 17.

⁴ Consultation Paper at page 9.

⁵ FCC Finds Qwest Failed to Show Need to Change Policy Status Quo in Phoenix, Arizona Market, Federal Communications Commission, Press Release, (22 June 2010).

⁶ Telecom Notice of Consultation CRTC 2010–43.

⁷ CRTC, Navigating Convergence: Charting Canadian Communications Change and Regulatory Implications, Convergence Policy, Policy Development and Research, (February 2010) at paragraph 161.

⁸ Consultation Paper at page 16.

⁹ Telecom Public Notice CRTC 2009–261–7.

¹⁰ In the 1970s, the Canadian oil and gas industry was highly regulated and subject to the oversight of the Foreign Investment Review Agency (FIRA). After FIRA was dissolved, domestic ownership went up. Today, almost 50% of the industry is owned by Canadian–based companies that can freely access global capital (Source: Canadian Association of Petroleum Producers). Moreover, Calgary today is Canada's "head office capital", measured on a per capita basis. A wide range of small, medium and large Canadian businesses are active in the sector, many of whom have become global leaders.

¹¹ In a 2006 OECD report, only Mexico and South Korea were found to have more restrictive regulations on FDI than Canada. Based on the 2009 OECD Communications Outlook, Canadian foreign investment restrictions in both carriage and content are more restrictive than 13 sample countries from the OECD, including some of the world's leading economies. In fact, since the 2006 study even Mexico and South Korea have loosened their restrictions on FDI so that Canada is virtually alone in its limitations on attracting global investment. (OECD, FDI Regulatory Restrictiveness Index: Revision and Extension to More Economies, December 2006, pages 7 to 9.)

¹² Study on Canada's Foreign Ownership Rules and Regulations in the Telecommunications Sector.

¹³ See: (i) Report of the National Broadband Task Force, The New National Dream: Networking the Nation for Broadband Access, Industry Canada, (June 2001); (ii) Report of the Standing Committee on Industry, Science and Technology, Opening Canadian Communications to the World, (April 2003), page 55; (iii) Telecommunications Policy Review Panel, (2006); (iv) Compete to Win: Final Report of the Competition Policy Review Panel, pages 46–49, (June 2008).

¹⁴ Ibid., Compete to Win.

¹⁵ Ibid.

¹⁶ Less than 10% total telecommunications market revenue share.

¹⁷ MTS Allstream Inc., Submission to Standing Committee on Industry, Science and Technology, Study on Canada's Foreign Ownership Rules and Regulations in the Telecommunications Sector.